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September 29, 2021   

 “We Can Ship” is the New Way to Delight Customers

2021 09 Supply Chain dominoes 1.jpg

Manufacturers and customers grapple with supply chain challenges

 

Lighting customers are often delighted by high performance fixtures, whizzbang control features, exquisitely designed aesthetics, second-to-none quality and outstanding value.  While all of those things are still very important, the way to really get a lighting customer’s attention these days is seemingly the ability to ship lighting products in a reasonable timeframe.

In the recent past, droves of lighting manufacturers boasted warehouses full of products along with 5-day and 10-day quick ship programs designed to get made-to-order light fixtures to a project site quickly.  And when the lead times were 4-6 weeks, those were widely accepted and commonly adhered to.  When an order missed the shipping window and arrived in 7 ½ weeks, the late order was sometimes met with disdain and dissatisfaction. 

Lowered Expectations:

Today in 2021, almost every lighting person we know would sign up for a steady diet of 7 ½ week lead times.  Quick ship programs are widely scaled back and paused.  Compounding supply chain issues are causing lead times to reach heights never before seen.  Uncertainty and delay after delay are the norm – sometimes the accepted norm.

Standard products that once shipped in 4 weeks are now experiencing 4-month lead times.  Certain microprocessor products common in LED drivers, controls and power equipment are now facing lead times in excess of 6 months.  We’ve heard anecdotal nightmares of 12-month lead times for some microprocessors.

Decisions, Decisions

We’ve talked with lighting people in large markets who tell us that many influential lighting specifiers seem to be relaxing the criteria for accepting substitutions for products that can’t ship on time.

One smaller lighting manufacturer we spoke with stated that they are no longer accepting small quantity orders.  The small orders are often presented to them because another manufacturer couldn’t ship that one fixture type.  Turning the operations team and factory upside down for a 17-piece order just isn’t worth the time, effort and hassles given the current supply chain challenges.

Even the Most Talented Lighting Companies Can’t Solve all These Challenges:

Power outages:  China is trying to meet a pledge to curb carbon emissions before 2030. This is causing rolling power outages throughout numerous provinces.  Many factories are working under reduced power demand by operating just two or three days per week.

Container shortages:  Containers are hot commodities.  Renting one normally costs $1500-2000, but now some companies are paying up to $10,000 to rent a container.

Shipping delays:  Pallet shortages.  Container shortages.  Shipping delays.  Even when the shipments arrive in the U.S. port via air or ocean, it could still be weeks before the container is unloaded and the shipment arrives at its destination.

Component shortages:  Pandemic-related product shortages — from computer chips to construction materials — were supposed to be resolved by now. Instead, the world has gained a lesson in the ripple effects of disruption.

Worker shortages:  Labor shortages are impacting Chinese factories as well as the American ports that receive the incoming containers of goods.

Price increases:  With scarcity, comes price increases.  And more price increases.  It’s not uncommon for lighting makers to implement 2-4 price increases this year.  And if you’re buying copper wire, that price quote is only good for 24 hours.

Covid-19 outbreaks:  According to reports, even a single reported case of the Delta variant can shut down an entire city in China.  Factories and ports are trying to stay healthy while maximizing production.

Chinese New Year:  We are 125 days away from the Year of the Tiger which starts on February 1.  The Chinese New Year festival lasts for 15 days bringing Chinese factory production to a screeching halt and often causing manufacturers to experience high employee turnover for workers who don’t return to their same jobs in the new year.

 

Which manufacturers are meeting lead times right now?

In recent months, we’ve asked dozens of lighting agents which lighting brands seem to be doing the best job in meeting lead times amidst all of these challenges.  The most popular answer is “nobody.”

One brand that was cited as doing a relatively good job meeting lead times in 2021 was Coronet LED.  So we called CEO Russell Osur to learn what the New Jersey based architectural lighting manufacturer was doing differently to overcome the headwinds.  Osur explained that unlike large companies that must abide by strict limits of how much raw goods inventory they maintain, Coronet LED is willing to overbuy an “extra million dollars of LED drivers” and stock “5-7 miles of the top eight aluminum extrusions” that his company sells.

Another US-based lighting manufacturer reported to be shipping reliably is American Linear Lighting (ALL).  The company’s factory is collocated with its extrusion supplier in North Texas.  ALL has a streamlined offering of linear fixture families and the company tells us that their next day quick-ship program “Linear Express” is alive and well.

No Easy Fixes

Companies with less dependency on Asian manufacturing and components will have an easier path to overcoming these challenges.  Given the need for semiconductors and electronics in LED lighting and controls products, it’s extremely difficult to escape long-term supply chain peril.  Furthermore, Mexico and U.S. manufacturing is not the right answer for many lighting manufacturers – and a company can’t exactly relocate a factory overnight in order to sidestep supply chain issues.

 

The widespread challenges continue, with many predicting a late 2022 recovery – and possibly longer –  to truly return to pre-pandemic levels of component manufacturing and commerce.

 

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